Daily Archives: February 27, 2018

BFC or IND? Which is better? And Why Does Procurement Care?

If you want to increase market share, the standard strategies employed by marketing typically fall into the:

  • BFC: Better, Faster, Cheaper bucket and the
  • INP: Innovative New Product bucket

In the first case of BFC, you pick a product out there (which could be one of your own) that people like, and figure out how to make it better, faster, cheaper and sell them a must-have upgrade.

In the second case of IND, you pick a product (like a cell phone) and figure out how to revolutionize it (like a smart phone) or how to add a feature (like facial recognition) that no one has yet and make it a must have.

In the first case, if the company makes a version of the product, Engineering picks the preferred supplier and starts a collaboration to try and take cost out of production while adding quality and features. In the latter, they undertake research into current products, production processes, and material requirements and try to find a design and a production process that can lower costs and improve quality or attractiveness to the market.

In the second case, a brainstorm is done to figure out what the market would want that might be possible, R&D is called in to see if it can be made a reality, Engineering is called in to get some production data for costing, research is done to see if the market will bear it, and a decision is made.

Sounds like it’s all Marketing, R&D, and Engineering — so why do you care? Because if the stakeholders involved decide something can be produced at cost X, they are going to expect you to beat that cost, whether or not its reasonable.

Moreover, when they have the option of BFC vs INP, they will often choose based upon their market projections of profit which comes down to their views on cost. So if you can’t meet the cost, the organization will lose and will be blamed. But more importantly, they can overestimate one cost and make the wrong choice, where you could win big, or, even worse, they can overestimate the supply market when there are really only two or three suppliers, all at capacity, and all without the time to do the necessary production line upgrades. Not only do you have a cost issue in the latter situation, but you also have a supply base issue.

Procurement needs to be at the table as part of all BFC and/or INP product considerations, especially when pricing and projections of market AND supply market are being made. Only Procurement can bring the proper knowledge, calculations, and projections for the company to make the right bottom line decision. And while Procurement will likely want to, and probably should, stay out of discussions of what the market will want, what R&D can do, etc., it can’t stay out of the cost and projection discussions. Otherwise, it’s the organization that will get burned in the end — even though it’s not at fault.